The Future of Retail

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Retail's slow demise was written in stone with the advent of the internet, and is now being slowly replaced by manufacturer direct sales. Not only does this cut out the middleman's profit, it also cuts out many of his expenses, such as retail space and sales staff, as well as shipping. In the old days, a product would have to go from a manufacturer to a distributor, then from the distributor to the retailer, where the customer would finally get his hands on it.

After all the expenses of moving through that network, a product that cost about twenty dollars to actually produce would end up costing the customer around one hundred dollars. In a manufacturer direct model, the customer could have had that same product, without sacrificing anything, for about fifty dollars or less.

Another innovation allowing for manufacturer direct sales is computerized inventory control and shipping methods, combined with platform like Amazon and Ebay, which give even small manufacturers the same exposure they would get by offering their products through large retailers like Walmart. It's now extremely easy for a manufacturer to set up their own point of sale website, or use a platform like Amazon, and ship products directly to customers. The automated systems allow the manufacturer to easily control inventory on any scale. This is slowed somewhat by international shipping rates and language barriers, but manufacturers abroad are catching on quickly. If you don't mind waiting a little for your package, you can find screaming good prices from Chinese suppliers on sites like Ebay, Amazon, and Alibaba.

But what about people who want to see things in person before they buy them? One of the biggest barriers to internet sales is the need to try on clothing. First of all, the cost of shipping will continue to fall with increased volume, allowing customers to regularly return products while still saving money, even after shipping costs are considered. A customer could order two or three sizes or models, keep the one that fits, and return the others. Computers will also offer more accurate sizing, making it less likely that the customer would order the wrong size in the first place. Apps that scan the customer's measurements will help them find clothes that fit. These apps will likely even be able to show you a rendering of what the clothes would look like on you, as well as help you shop for used clothes by comparing your measurements to the seller's.

Another innovation that will reduce the need to try things on is technology allowing for mass produced custom made goods. You will scan yourself with your smart phone, tablet, laptop, smart TV, etc. (any device with a camera), and an AI will come up with custom patterns. A robotic laser will then cut out the patterns, assisted by a program that will pool all of the orders and lay out the patterns to get maximum use from the bolt of material. The pieces will then be gathered together and taken to the sewers, who will sew them together without any difficulty. This means everything from your underwear to your suits will be custom made for you, and without much additional cost over traditional manufacturing. In fact, the perfect scalability associated with this type of manufacturing may even offset the cost completely.

Another consideration is that we will see a steady decline in cheaply made goods from underdeveloped countries like China. These countries are building a strong middle class, which will mean a modernization of their economies, including moving from manufacturing to services. What manufacturing does survive will be geared towards quality and innovation. The throw away nature of developed western nations, especially America, has always been unsustainable, as well as economically reckless. In the future, products will cost more and be of higher quality, meaning American consumers will put more thought into their purchases. This will also create a thriving market for used goods, as higher quality products are more likely to outlast their owner's need for them. Another consequence of gentrification is that manufacturing will move back into developed countries, reducing the need for international shipping in manufacturer direct business models.

However, retail spaces where customers can get their hands on products will still exist, but with a radically different business model. These stores will be equipped with dozens of cameras that will record customer behavior, which will provide invaluable market research. Manufacturers will pay a fee to the store to have their products stocked there, which will allow the retailer to compete with manufacture direct prices, as they will make their money not from the markup on products, but from the sale of the market research data. It will let manufacturers know in real time how their products are doing. They will also be able to study the potential effect of changes made to a product, such as new colors and sizes. In this way, retail will morph into market research laboratories. The ideal platform for this is shopping malls, as they will allow behavior to be analyzed on macro and micro levels, as well as bring customers to non-retail businesses like restaurants.

Another area where retail will survive is grocery stores, but the model will be much different. Instead of having a retail floor, all the stock will be kept in the back and not be pulled until a customer orders it. Basically, the customer will submit their shopping list online, and products will be pulled directly to fill that customer's order. This means products go directly from stockroom to grocery sack, minimizing the manual labor required to get the product into the customer's hands. The products will also be rung up as they're pulled from stock, eliminating the registers and greatly simplifying the entire inventory control process. After purchasing the products online, customers will simply pull up to a loading dock and collect their bags, or even have them delivered to their house via autonomous vehicle. Depending on the customer's location and routines, it may prove more cost effective to have their groceries delivered than to pick them up in person.

How long all of this will take to come to fruition is uncertain, but what we can say for sure is that the retail landscape will see dramatic change in the coming years.